10-QPeriod: Q3 FY2006

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q3 Ended Jul 1, 2006

Filed August 4, 2006For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported its second-quarter 2006 results, showcasing revenue growth driven by both organic expansion and strategic acquisitions. The company experienced a 9% increase in revenue compared to the prior year's quarter, reaching $713.5 million. This growth was bolstered by a 5% organic increase, excluding the impact of acquisitions and currency fluctuations, highlighting sustained demand for its core products, particularly in mass spectrometry and spectroscopy instruments. The company also made significant strategic moves, notably announcing its definitive agreement to combine with Fisher Scientific International Inc. in a tax-free, stock-for-stock exchange valued at approximately $10.3 billion. This transformative merger, expected to close in Q4 2006, will create a combined entity named Thermo Fisher Scientific Inc., with Fisher's shareholders owning approximately 61% of the new company. The report also details a recent acquisition of EGS Gauging, Inc., a provider of flat polymer web gauging products, underscoring TMO's continued focus on expanding its Measurement and Control segment. Management remains confident in the company's liquidity and ability to meet future capital requirements, supported by existing cash, operating cash flow, and credit facilities.

Key Highlights

  • 1Revenues increased by 9% to $713.5 million for the three months ended July 1, 2006, compared to $653.6 million in the prior year period, driven by both organic growth and acquisitions.
  • 2A significant merger agreement was announced with Fisher Scientific International Inc. in a stock-for-stock exchange valued at approximately $10.3 billion, expected to close in Q4 2006.
  • 3The company acquired EGS Gauging, Inc. for $26.3 million (net of cash acquired) to enhance its Measurement and Control segment's product offerings.
  • 4Operating income for the quarter rose to $72.2 million from $53.2 million in the prior year, with an improved operating margin of 10.1% compared to 8.1%.
  • 5Income from continuing operations slightly decreased to $48.9 million from $56.8 million, primarily due to a significant gain on investment sales in the prior year's quarter.
  • 6Cash flow from operating activities for the first six months of 2006 was $98.2 million, an increase from $88.9 million in the same period of 2005.
  • 7The company is actively repurchasing its common stock, having purchased $6.25 million worth of shares in the second quarter of 2006.

Frequently Asked Questions

The most significant development is the announcement of the definitive agreement to combine with Fisher Scientific International Inc. in a tax-free, stock-for-stock exchange. This merger, valued at approximately $10.3 billion, is expected to create a leading entity in the scientific products and services industry and is anticipated to close in the fourth quarter of 2006.

Thermo Fisher Scientific Inc. reported a 9% increase in revenue for the second quarter of 2006, reaching $713.5 million, up from $653.6 million in the same period of 2005. This growth was driven by a combination of organic demand (5% increase excluding acquisitions and currency effects) and contributions from recent acquisitions.

As of July 1, 2006, the company had approximately $639.0 million in outstanding debt. Management expressed confidence in its liquidity, stating that existing cash, cash equivalents, short-term investments, future operating cash flow, and available credit facilities are sufficient to meet capital requirements for at least the next 24 months. The company also expects to negotiate a new revolving credit agreement in conjunction with the Fisher Scientific merger.

Yes, the company acquired EGS Gauging, Inc. in June 2006 to expand its Measurement and Control segment. It also acquired GV Instruments Limited on July 20, 2006, subsequent to the quarter's end, to broaden its mass spectrometry product offerings. Information on divestitures is less prominent in this report, but the revenue figures account for net impacts of acquisitions and divestitures.